Exam 4: Completing the Accounting Cycle

A worksheet can be thought of as a(n)

Which one of the following statements concerning the accounting cycle is incorrect?

Closing entries are unnecessary if the business plans to continue operating in the future and issue financial statements each year.

Price Company earned net income of $43,000 during 2010. The company had owner drawings totalling $30,000 during the period. Prepare the entries to close Income Summary and the Price, Drawing account.

It is not necessary to prepare formal financial statements if a worksheet has been prepared because financial position and net income are shown on the worksheet.

Office Equipment is classified in the balance sheet as

The accounting cycle begins at the start of a new accounting period.

The most important information needed to determine if companies can pay their current obligations is the

The following information is for Acme Auto Supplies: The total dollar amount of liabilities to be classified as current liabilities is

Closing entries may be prepared from all but which one of the following sources?

If Income Summary has a credit balance after revenues and expenses have been closed into it, the closing entry for Income Summary will include a

Closing revenue and expense accounts to the Income Summary account is an optional bookkeeping procedure.

The income summary account

Wakefield Company discovered the following errors made in January 2010. 1. A payment of Salaries Expense of $800 was debited to Equipment and credited to Cash, both for $800. 2. A collection of $2,000 from a client on account was debited to Cash $200 and credited to Service Revenue $200. 3. The purchase of equipment on account for $680 was debited to Equipment $860 and credited to Accounts Payable $860. Instructions Correct the errors by reversing the incorrect entry and preparing the correct entry.

Balance sheet accounts are considered to be

Match the items below by entering the appropriate code letter in the space provided. A. Worksheet B. Permanent accounts C. Closing entries D. Income Summary E. Reversing entry F. Capital Stock G. Current assets H. Operating cycle I. Long-term liabilities J. Correcting entries 1. Obligations that a company expects to pay after one year. 2. A part of owners' equity in a corporation. 3. An optional tool which facilitates the preparation of financial statements. 4. A temporary account used in the closing process. 5. Balance sheet accounts whose balances are carried forward to the next period. 6. The average time that it takes to go from cash to cash in producing revenues. 7. Entries to correct errors made in recording transactions. 8. The exact opposite of an adjusting entry made in a previous period. 9. Entries at the end of an accounting period to transfer the balances of temporary accounts to a permanent owner's equity account. 10. Assets that a company expects to pay or convert to cash or use up within one year.

The relationship between current assets and current liabilities is important in evaluating a company's

The final closing entry to be journalized is typically the entry that closes the

All of the following are property, plant, and equipment except

Closing entries are made